Financial News

Ireland Budget: More Austerity Measures

There were angry clashes outside the Irish parliament building after the country's finance minister announced another austerity budget.

Hundreds of protesters gathered to rally against tax increases and spending cuts worth up to 3.5bn euros (£2.8bn).

The budget has been described as "deeply unfair" and "disgraceful" by opposition leaders, who have hit out at tax rises which they say will hit families, children and the elderly.

Sinn Fein deputy leader Mary Lou McDonald told the Irish Independent: "This budget is deeply unfair to those on low incomes, to children, to single parent families, to homeowners in negative equity and to the elderly.

"The treatment of children in this budget is disgraceful."

But finance minister Michael Noonan said the country must get back to a level which would fulfil the conditions of the EU/IMF bail-out package, so that it could return to borrowing money from the international lenders.

He said: ''We will not dither or procrastinate but will drive forward to lead this country out of the despair and despondency and lack of self worth in which we found ourselves in March 2011.

"There are manifest signs that the country is emerging from the worst of the crisis and that the efforts of the Irish people, despite the hardship, are leading to success."

The basis of that will be a 10-point tax reform, which will include reforming the three-year corporation tax relief for start-up companies, increasing the cash receipts threshold for VAT from 1m euros (£800,000) to 1.25m euros (£1m).

Mr Noonan also announced a new property tax of 0.18% of the value of a home up to £800,000, although any new or previously unoccupied homes bought between the beginning of next year and the end of 2016 will be exempt from the new property tax.

For all other homes, the Local Property Tax will be introduced in July next year, and will include a higher rate of 0.25% that kicks in on the balance of any property over and above one million euros (£800,000).

The government also increased tax on alcohol and cigarettes, and announced that maternity benefit would become a taxable income in July 2013.

But income tax rates, as well as duty on petrol and diesel, were left unchanged.

The budget also included significant spending cuts, totalling about 2bn euros, including cuts in child benefit payments and unemployment programmes.

To boost jobs, Mr Noonan said on Wednesday he will extend a range of incentives and credit lines to small and medium-sized businesses and offer trucking firms rebates on fuel costs.

The Irish government projected a budget deficit of 8.2%, compared with a target of 8.6%. The deficit is predicted to fall steadily to 2.9% by 2015.

The new measures come on top of 25bn euros (£25bn) taken out of the economy since 2008 - equivalent to 15% of annual output - although the rapid rate of services growth last month showed its ability to weather the cuts as well as the eurozone downturn.

In late 2010, having been excluded from the bond markets, the government was forced to seek 67.5bn euros (£54bn) in loans from the European Union and the International Monetary Fund.